BBC payday loan calculator

Research shows that pay day loans are often being used for longer periods than intended, with customers paying off one loan with another, starting spirals of debt that can end in financial disaster.

In support of a BBC Three documentary Young, British and Broke: The Truth about Pay day Loans, BBC Knowledge & Learning commissioned Applied Works to create a ‘pay day loan calculator’ – a tool to explain the high and ‘compounding’ nature of pay day loan interest rates.

Our calculator shows how on any borrowing, the two key things that affect the interest cost are the annual percentage rate of interest (APR) and how long you borrow for. We visualise what happens when a pay day loan is subject to compound interest over extended periods of up to 12 months. Consumers can also compare pay day loans to other borrowing options.

The calculator visualises how debt can rapidly mount up on loans with high APRs.

The calculator visualises how debt can rapidly mount up on loans with high APRs.

The tool is fully responsive, with mobile being a key platform for the audience, and the visualisation takes inspiration from the ‘Singapore Model’. This model is a visual method for teaching mathematics that bridges the gap between physical and conceptual cognitive experiences. It uses simple representative shapes that accurately reflect the numerical values of the problem being solved.